Turning point in the silver market: the march toward physical scarcity continues to accelerate without stopping

In mid-December, the most talked-about metal in the precious metals market was not gold but silver. Within just a few weeks, it repeatedly hit historic highs, jumping from the $40s to the $60s, leaving market participants little room to breathe. On December 12, the spot price of silver reached an all-time high of $64.28 per ounce before plunging sharply. Since the beginning of the year, silver has risen nearly 110%, far surpassing gold’s 60% increase. At first glance, this price surge seems rational, but behind it lies the hidden risk of a systemic market collapse.

Why Is Silver Soaring — Basic Reasons and Hidden Structural Issues

The reasons for silver’s rise can be superficially explained. Expectations of Federal Reserve rate cuts have invigorated the entire precious metals market, with volatile silver reacting more sensitively than gold. At the same time, rapid growth in emerging industries such as solar power, electric vehicles, data centers, and AI infrastructure has increased industrial demand for silver. Additionally, production from major mines in Mexico and Peru has fallen short of expectations, and global inventories continue to decline, accelerating a potential silver shortage scenario.

However, the real problem lies in silver’s fundamentally different structural vulnerabilities compared to gold. While central banks worldwide have purchased over 2,300 tons of gold in the past three years, official central bank reserves of silver are nearly zero. Gold’s daily trading volume is about $150 billion, whereas silver’s is only around $5 billion. The market is vastly underliquid, making it susceptible to rapid price spikes when large amounts of capital flow in.

Most dangerously, a large portion of the silver market is not physical silver but “paper silver” — consisting of futures, derivatives, and ETFs. Shallow markets are prone to capsizing, and massive capital inflows could instantly disrupt the entire market.

The Discrepancy Between Futures and Physical Markets: Trust Is Breaking Down

Typically, the spot price of silver should be slightly higher than the futures price, due to storage and insurance costs, a difference known as the “spot premium.” However, since the third quarter, this norm has reversed. Futures prices have surpassed spot prices, and the gap continues to widen.

This signals a dangerous market condition: either excessive optimism about futures or market manipulation by some entity. It is believed that funds are pushing up futures prices.

An even more concerning phenomenon is the abnormality in the physical delivery market. At the world’s largest precious metals exchange, COMEX (New York Mercantile Exchange), about 98% of futures contracts are settled in U.S. dollars or rolled over. Recently, however, the volume of physical silver deliveries has surged, as investors lose confidence in “paper silver” and seek to take actual delivery of silver bars. Similar trends are occurring with silver ETFs, straining the fund’s silver reserves.

Major markets like NY COMEX, London LBMA, and Shanghai Gold Exchange are experiencing a rush to buy silver. By the end of November, silver stocks at the Shanghai Gold Exchange had fallen to 715.875 tons, the lowest since July 2016. CME silver inventories also plummeted from 16,500 tons in early October to 14,100 tons.

The reason is simple: when dollar interest rates are lowered, there is a psychological tendency to avoid dollar settlements. An underlying concern is that exchanges may not hold enough physical silver to settle all contracts.

The Fate of the Silver Market Controlled by JP Morgan Chase: The Power of the “Silver Gatekeeper”

A key player in the structural issues of the silver market is JP Morgan Chase. The bank is a recognized major player in the global silver market.

Between 2008 and 2016, JP Morgan manipulated silver and gold prices through large-scale trading in the futures market. By placing massive buy and sell orders to create false supply-demand impressions and then canceling orders at the last moment for profit, they engaged in “spoofing.” This led to a $920 million fine by the CFTC in 2020.

But the real sophistication was not just in spoofing. JP Morgan suppressed silver prices through large short positions while simultaneously accumulating vast amounts of physical silver at artificially low prices. Since around 2011, when silver hovered near $50, JP Morgan continued increasing its silver holdings in COMEX warehouses, eventually owning about 50% of total COMEX silver inventories.

Currently, JP Morgan holds approximately 196 million ounces of silver on COMEX, accounting for about 43% of total inventories. Additionally, the bank is the custodian of the Silver ETF (SLV), managing 517 million ounces (worth about $32.1 billion). Most importantly, JP Morgan controls over 50% of the “eligible silver” (deliverable but unregistered silver) market.

The core of the silver market game revolves around who can produce physical silver and whether that silver can enter the delivery pool. JP Morgan has shifted from being a “short seller” to a “silver gatekeeper.” Only about 30% of registered silver is deliverable, with most of the eligible silver concentrated among a few institutional investors. The stability of the silver futures market is thus essentially dictated by the actions of a very small number of players.

The End of the Paper System: A Silent Shift Toward Physical Assets

In one word, the current silver market can be described as: the market is moving, but the rules have changed.

Trust in the “paper trading system” for silver is irreparably eroding. One ounce of physical silver can correspond to more than a dozen warrants, and actual silver bars are repeatedly used as collateral, leased, and employed in derivatives worldwide. This system functions well under normal conditions, but when everyone demands physical delivery, it risks a liquidity crisis.

On November 28, CME experienced an approximately 11-hour halt due to a “data center cooling issue,” suspending trading of gold and silver futures on COMEX. This occurred immediately after silver hit an all-time high, leading some to speculate that it was a protective measure for market makers exposed to extreme risk.

Similar changes are happening in the gold market. Gold inventories at NYMEX continue to decline, with registered gold repeatedly hitting new lows.

From Liquidity to Certainty: The Battle for Price-Setting Power

Capital is quietly shifting worldwide.

Over the past decade, mainstream asset allocation has become highly financialized, with ETFs, derivatives, and structured products securitizing everything. But increasingly, funds are withdrawing from financial assets and moving into physical assets like gold and silver, which do not rely on financial intermediaries or credit guarantees.

Almost all central banks have significantly increased their physical gold reserves. Russia has banned gold exports, and Western countries like Germany and the Netherlands are requesting repatriation of their overseas-held gold reserves.

According to Bloomberg, gold is moving from west to east. Since late April, over 527 tons of gold have flowed out of New York and London’s major precious metals markets, while imports to major Asian countries including China have increased. Even JP Morgan Chase moved its precious metals trading team from the U.S. to Singapore by late November 2025.

The essence of this movement is a new struggle over the power to set currency prices in an era of dollar depreciation and de-globalization. The soaring prices of gold and silver seem to reflect a return to the gold standard. While this may not be immediately feasible, one thing is certain: whoever controls more physical commodities will have greater price-setting power.

When the music stops, only those holding real assets can sit safely.